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Archive for September, 2011

The federal government’s fiscal year ends in five business days, on September 30, 2011. Unless Congress acts to provide emergency funding (a Continuing Resolution), most government agencies will not have authorized funds to operate. Much of the federal government will shut down. When Congress fails to do their job, we all pay, and not just inside the I-495 Capital Beltway.

We’ve learned, however, that social security checks still go out, federal taxes get collected, and TSA airport screeners till show up for work. There are, in fact, a few appropriations bills that have passed, and a few government agencies whose funds come, not from appropriations, but from income collected in fees and taxes.

Many Americans think that the shenanigans on Capital Hill don’t directly affect them. After all, they don’t work for the government, right? Why should they care?

Congress Has One Job to Do

Congress has a few exclusive powers under the US Constitution. Among those very few exclusive powers is the authority to raise taxes and distribute revenue to the executive branch. Revenue bills must originate in the House.

All the other blather, goings on and dealmaking in the House and the Senate are secondary to their main job of raising and distributing the ebb and flow of money into and out of the US Treasury. This is their job.

When Congress fails to do their job, under law the Executive Branch (and this includes the military) cannot spend money. This falls under the Antideficiency Act, which makes illegal spending money before it is appropriated. A government employee can go to jail for this.

Now to why you care….

Imagine for a moment you are a company that has bid a contract to do work for the government. By the way, it costs a lot of money and takes a lot of time to put in a bid for the federal government. It also takes a lot of time for the feds to get around to selecting the contractor and awarding the contract. You don’t get paid for any of this; it’s a gamble you take and a cost of doing business.

Congratulations! You are the winning bidder and will be awarded the contract…as soon as the budget is approved. The project will start on the first day of the next fiscal year (if the budget calendar goes the way it is supposed to go).

It doesn’t go that way, does it? Republicans “stand on their principles” and Democrats want to “tax the millionaires”, and now we have no budget, and we have a continuing resolution. Under the rules of a CR, no new projects can start. We NEVER had a budget in 2011. The government operated on CR for the ENTIRE FISCAL YEAR.

Meanwhile, our poor contractor has hired workers, built an assembly line and stocked parts in anticipation of an October 1 startup. He had to, because he was expected to be ready to produce if he wanted to keep in good graces with his government customer.

Avalanche Theory

Now he either has to keep all those people on the payroll or lay them off. He either has to send back the parts or keep them. He has no income to offset those costs. For every month Congress bickers and delays a full spending bill, he loses thousands or millions of dollars, depending on the size of the business or investment. This loss trickles cascades avalanches down through the supply chain and through subcontractors to affect businesses and paychecks all across America.

Raise your hand if you know someone who earns at least part of their living making or selling something for or to the federal government either directly or indirectly. I bet their rainy day fund is pretty dry about now.